06/01/12 – Where/When Will I Bottom Fish??? © ™


CHART LINK – at StockCharts.

As a continuous market move extends into weeks or months, the shorter term charts become useless as I draw trendlines and wave count only in the longer time spans.  Make sure you keep this in mind as the first few charts on page 1 are short term and may have nothing to show.




I’ll try to respond to your emails as I’m never too busy,  just too lazy.



Bought on Thursday 5/11/12 at 2:36 AM EDT

Sold on Friday 5/12/12 (and shoulda shorted)


LONG TERM – Up in black 3, chart #10.8

INTERMEDIATE TERM – Down, correction after blue 2 up, chart #10.6




BobsWaveCounts is my twitter name.  If I have something short to say and it’s late at night, I’ll tweet.  If I don’t blog or tweet, I’m busy or out of the loop.



The only thing I got right recently was issuing a sell signal on April 3rd.  After that I’ve been off target on the degree of the correction.  I haven’t done any damage to myself with my fleeting buy signals.  In fact each was profitable as the rally came as anticipated but it never held up.  The money to be made was on the short side.

Jeff Saut and myself had thought that the correction was a buying opportunity.  Jeff has probably jumped ship.  Last Monday’s statement said,“provided the SPX does not break decisively below 1290, for that would trigger a danger signal for further price erosion.”  The SPX closed Friday at 1278 and Jeff is probably not going to write kind words on Monday.

Terry Laundry has been anticipating a correction that will take out the October lows.  I can’t say that’s wrong but I don’t like the implications should that come about.  For me it “could” have a “look” to the bull market since 2009 that I don’t like.

One note about Terry.  His clients are making money and I’m also one of his clients.  Terry is a fallback situation for my wife should it ever be needed as you never know how long we’re going to be here.  Terry is the only person that I have confidence to make money in a bull or bear market.  Money managers are usually too inflexible to suit me.  Terry is a guy with an unusual idea and I like people that have good ideas (ones that work).

The daily chart of the SP 500 shows 2 steps down and an apparent attempt at a 3rd step down.  It’s also possible that we have NOT completed 2 steps down and the present action is sub-stepping in step 2.   I don’t like the implications of that statement.

At the conclusion of the present step I “may” buy the anticipated rally (if I see it coming).  I say this because the chart would show 3 steps down.  I would let the sub-stepping idea be contained by sell stops.  Sell stops take you out of the market if you’ve made a mistake and this market is rife with mistakes.

The present step down is obviously making a lot of noise and it could be the “bang” and not a whimper that one looks for on an corrective ending.


The TSX index has been an early indicator of the problems for this market as it peaked in late February.  It clearly shows 3 steps down but that doesn’t mean there won’t be a 4th and 5th step.  If 3rd step is really finished, I would expect commodities to strengthen in tandem with the TSX.  It ain’t happening but a funny thing occurred on Friday, the dollar didn’t have a significant rally that would be expected on such a strong down day in the market.  Conundrum alert!  But one day doesn’t make a trend.


The next chart shows London FTSE, German DAX and the Russell 2000.


Best Case Scenario:

We could have a rally coming soon (measured in time not points).

Worst Case Scenario:

We are sub-stepping in step 2 and lots more decline will follow.

Sub-stepping into more and more steps is a bad scenario and “could” denote the end of the bull market since 2009.  I had remarked previously that a retracement below October 2011 doesn’t seem normal for a continuation of the 2009 bull market.  November 2011 is OK but not October.  If the October lows were penetrated, I would have two alternatives (1) the bull market since 2009 is over and we have begun a major multi-year bear market or (2) the correction since Feb/May 2011 never ended.  There is precedent for alternative #2.


My viewpoint of bull/bear markets is identical with Edson Gould’s.  Bull/bear markets are normally long term events that are punctuated by smaller bull/bear moves.  These smaller moves can be many months in length and be greater than 20%.  Unfortunately most people don’t see the long term continuity in the market and call every significant move a bull or bear market.  It’s one of those nomenclature things where no one is wrong (or right) but you can miss the big picture of what is really happening by focusing on the smaller picture.

Historically there is usually a long term thread that connects things together.  Robert Farrell said it by describing the market as a pendulum swinging back and forth from extremes.  A move is not complete until we hit the extremes of a pendulum move.  With this in mind, markets always overshoot reality in the pendulum swings.  2000 was a good example of the extremes of the bull market pendulum and since then we have been in a very long term pendulum swing to the downside.

A troubling fact is that we never had a really significant breakout in ALL indexes above the large step 2 highs, which would have denoted a genuine large step 3.  We could be seeing a pull back into the corrective action following large step 2 (May 2011 peak).

Today we are faced with the collapse of the EU or the euro and all of its resulting tentacles reaching out to bring the world into recession (or worse).  It would be crazy for the EU to not mend this situation and carry on for a while longer before the true collapse comes.  This has always been my position, but since we have some scary egos involved, who knows what really is going to happen???  People can do the dumbest things sometimes.  But regardless, the EU is living on borrowed time and only if it inflates can it extend the situation for a decent period of time.  We all know what Germany thinks of inflation (Hitler came to power).



Why are we having such a long term wave event, one that is twice the length of the 1965-1974 event???

Two answers:

(1) Edson Gould said corrections usually last 1/3 the length of the preceding bull market.  If the beginning of the bull market was 1946 (war ended) and lasted until 2000, that’s 54 years.  1/3 of 54 years is 18 years and 2000 plus 18 is 2018.  I had also reached that same conclusion based on the 18 year cycle.  But if we measured from 1942 (Battle of Midway and the Pacific war is won), which is where I place the end of the 1929 collapse, the elapsed time is 58 years and 1/3 of 58 years is 19.3 years.  19.3 years plus 2000 equals almost 2020.  For symmetry, Terry Laundry has a mega-T in gold that ends in 2020.  He is saying that gold is in an uptrend until 2020.  You can make up your own scary gold story to take you to 2020.

What if you started counting from 1974, which was the end of the last completed bear market (1965-1974).  2000 minus 1974 is 26 years and 1/3 of 26 is 7.8 years.  2000 plus 7.8 years is about 2008.  With that calculation, the bear market beginning in 2000 ended in March 2009.  The only problem with this calculation is that I can’t see 3 large steps down since the peak in 2000, two yes but not three.

(2) It’s also government manipulation of the economy.  The FED/Congress and their brethren have become so good at this manipulation that any major corrective event can’t play out without interference.  The government fights the recessions with all of its might and available tools, until finally there is nothing left to fight with.  The end result in a disaster scenario is that the government is powerless to stop the economy in it’s final death throes because they have nothing left to fight the economic downtrend. That could take place in a large step 3 down.



Death throes is almost what took place in 2008 as things were so very close to spinning totally out of control in a worst case scenario.  But free money and “helicopter Ben” saved the day by throwing money at the problem.  You can’t discount the power of “free money”.

Likely, you personally wouldn’t have been prepared for what “could” have happened in 2008.  In early 2008 I was initially caught flat-footed by the severity of events to come.  2008 didn’t match my timeline, sound familiar???  Because that’s what I’m saying presently and I’m not too thrilled with that.  In 2008 I believed in a bear market but catastrophic terminal event . . . no.

In a worst case terminal event, it’s not a matter of being on the right side of the market, it’s conservation of capital.  That’s something most people would find difficult to believe if they were short all the way down during a collapse.  You would make lots of money  . . .  but all one needs to do is read behind the scenes events of 1987 where many brokers and clearing houses were bankrupt.  SIPC could not have saved everyone and Greenspan understood the problem and threw money at the situation guaranteeing solvency.  There lies the rub, you can make a LOT of money all the way down in the crash but if your broker and clearing house disappeared and there was no SIPC, you would lose EVERYTHING because there would be no recourse.  It’s just a for instance horror story to keep you awake at night and best used to illustrate how conservative you should become as things grow beyond your understanding in historic disaster situations.  As an outsider, you’ll never be privy to the details until the end has already taken place.  Remember this when you think you might want to depend on FDIC and/or SIPC.  If any of this ever, ever happens, it will be way up the road, not around the next bend.

For instance, suppose the United States debt becomes so large that creditors balk at buying more paper debt because the government is about to mount a monstrous bailout.  What do you think would be the result???  Higher interest rates to the point where no bailout would be possible.



The Facebook frenzy among the public makes one wonder about an extreme in the market.  Although this frenzy was not coincident with a peak, it was reminiscent of the extremes of 2000, when the public thought they could do no wrong.  FB was a sure thing and buyers were going to be rolling in dough.  I’m sure everyone knows someone that was involved in this fiasco.  Hopefully you stayed away.

With FB, remember Grandville’s quote, “It it’s obvious, it’s obviously wrong”.  This little ditty can keep many of us out of trouble and you should never forget it.

In the larger picture, we finished step 2 in large step 3 counting from March 2009.  I have often stated that the corrections following step 2 can be large and threatening even to the point of making ME believe that the bull move is finished.



Oh my gosh, one of my four Apple computers (a Macbook Pro) went totally out of it’s semiconductor mind.  The trackpad had gone berserk and made the computer completely unusable.  I thought it had been a long run of good fortune but the odds caught up with me and now I have an Apple computer that has to go to Mac Hospital and be ripped open.  Semiconductors guts strewn all over the operating table as they trace down my problem, all the while running up a huge repair bill on me.  I started thinking about buying a Macbook Air but since a 15″ Air is coming soon, I couldn’t buy now.  I’ll think about that another day.

But first I’ll make one phone call and see what happens.  They said:  How old is your battery??  4 years.  You know they only last about 2 years.  Nope, I didn’t know that.  The batteries swell when they get old and the trackpad is directly above the battery.  The swelling battery pushes on the trackpad and creates a crazy malfunctioning computer.  Just put a new battery in and all will be OK.

And so it was. A simple maintenance problem that I should have taken care of about 2 years ago.

The Apple legacy lives on for me with no problems other than routine maintenance overlooked by me.  And me a computer geek since 1978, the horrors of it all.  Horrors that I didn’t know.  Horrors that I’ve been backsliding and becoming too dependent on a product that needs no attention.  Horrors . . . Oh well, I’ll put up with this horrible situation for awhile longer.



Sometimes I don’t know what I’m going talk about.  Today was no exception (it only took me 3 days to write this blog).  Because I was out of the loop (no internet – horrors) and that fine tuned edge disappears so quickly, it’s hard to get back on track.  So I started looking at the charts to see what was wrong.

The result was a a runaway blog.  I hate it when I do that.  I start and can’t shut up, bouncing from one theme to another without a coherent thought.  This is especially bad when I’ve said it all in different words before.

But cut me some slack, I’m a senile old man who can’t remember where he put his car keys or why he left the computer to go to the kitchen.  When I’m not doing that I’m always on my way to the bathroom.  It’s easy to remember why I’m heading for the bathroom and you guys will know exactly what I’m talking about some day.

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4 Comments on “06/01/12 – Where/When Will I Bottom Fish??? © ™”

  1. Bob Says:


    I have changed my chart page. The stocks are gone on pages 4 and 5. Presently, pages 2 and 3 are shorter term and identical to pages 4 and 5. Pages 4 and 5 are almost the same as the old pages 2 and 3, only a little longer time frame than before.

    The ADX lines have been added in on new shorter term pages 2 and 3. When you wrote your comment, I was in the process of changing things. I’m unsure if I’m finished, but certainly finished for today.

    I had individual stocks in the old charts thinking some people might like to see some shaker and movers, but no one ever mentioned them, so they’re gone. I only have 5 pages to play with so choices are made.

    I was relatively sure that today’s flash upward was the end of the current move. ADX confirmed that viewpoint as the ADX turned down.



  2. focus12345 Says:

    Hi Bob,

    Your 60 minute and Daily ADX charts have changed. They don’t have the green and red lines to determine buy and sell points also the notes are missing? You have not posted in awhile are you still on the sideline?



  3. focus12345 Says:

    Hi Bob what’s your take on today’s action. Terry’s VO broke the last 3 highs? Stands at 31 with a rising pattern.



  4. focus12345 Says:

    Welcome back BOB.


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